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Treasury Secretary Snow at FLIR Systems (Portland, OR)

I attended Treasury Secretary Snow's visit to FLIR Systems in Portland on March 28th as a member of the media. This was a stop on the "60 Stops in 60 Days" tour. As a blogger I have no credentials, and the event was supposed to be for employees and credentialed media only, but the personnel at FLIR and Treasury (and the Secret Service) were very accommodating.

Because I hadn't undergone any sort of background check (no credentials) they made me leave my camera and laptop with the receptionist. They did provide me a pad of paper and a pen, and I had fortunately brought a printed copy of the questions I wanted to ask the Secretary, so things worked out well. My special thanks to Doug Badger at FLIR. UPDATE 2005-03-29 20:35:18 UTC: Doug is in PR for the Administration, not a FLIR employee -- thanks Sarah and Steve! I thought their precautions were reasonable, and in fact I'm surprised they didn't ask to search me. (If I were running security and some random blogger came in off the street, I would've been pretty worried. At least I was well-dressed, not in pajamas.)

The Treasury Department's official press release contains the text of his speech. Sort of. It resembles the speech he gave, but there were lots of differences.

The speech didn't start at the advertised time. Media was asked to arrive at 1:15 (I did) and was told the Secretary would speak at 2:00. He spoke at 2:00 — with the company executives. It wasn't until 2:30 that he came to where the employees and media were assembled. I'm naïve, and didn't anticipate this.

There was only one other non-credentialed-media person covering the event, Steve Buckstein, President of the Cascade Policy Institute, a local think-tank that's been on my sidebar for a few months. It was a pleasure to meet him and talk with him for the half-hour before Secretary Snow's remarks. Look at the Institute's website; I sidebarred it because I agree with most of it.

Secretary Snow's remarks were given on the shop floor, not in any kind of auditorium. It's good that I had a pen and pad, because the laptop would have been useless. This location provided a photo-op for the Secretary to be seen with some of the equipment FLIR produces.

Follow the earlier link to the Treasury press release if you're interested in Snow's prepared remarks. What I was interested in covering was the Q&A with employees and the media, because you won't find it anywhere else. (I need some sort of "blogosphere exclusive" graphic to insert here.)

The first question was about the government "dipping into" the trust fund. Secretary Snow explained that there's no real money in the trust fund, that "the government doesn't have gold sitting in a safe somewhere." Actually, it does, but the Secretary's point is well-taken. I've discussed issues related to the trust fund at length in the past.

The second question asked whether Social Security might become means-tested. Secretary Snow used this question as an opportunity to highlight the broad range of options the President has said are "on the table," including changing indexing methods, means-testing, raising the retirement age, and reducing the extent that higher contributions yield higher benefits. In other words, there's no specific plan yet.

I have believed for a long time that means-testing or weakening the link between contributions and benefits is inevitable, and I'm not happy about it. In plain language it means soaking the rich, and I am angered at the notion of being penalized for being a responsible saver. As a lover of economics, I hate perverse incentives. Combining means-testing with an increase in the cap on wages subject to Social Security taxes would only add insult to injury.

The third question asked whether the changes in the Social Security system, if enacted, would be on-budget or off-budget. The question was poorly phrased, but the intent was clear: will the transition costs be weighed into the math when evaluating President Bush's pledge to cut the government budget deficit? Secretary Snow answered by talking about the importance of transparency in financial markets and how he's talked to people in the markets who are enthusiastic about the changes. He was more optimistic than Alan Greenspan, who in his recent testimony before Congress carefully pointed out that we don't know to what extent the financial markets have discounted the unfunded liabilities of Social Security. Fundamentally, Snow did not answer the question, but he may have misunderstood it.

The fourth question asked about potential changes to existing retirement accounts. Snow said that Social Security was never intended to be a person's only source of retirement income, and that FDR was clear about this when the program was enacted. Snow praised Health Savings Accounts in particular as a savings vehicle. He said that the young are notoriously poor savers, and that it's an advantage of the President's system that it forces people to save. Foot in mouth, he quickly rephrased it as an opportunity. (Thanks Steve; I missed the rephrasing.) He finished by saying that he's in favor of savings — well, at least he's clearly not a Keynesian.

It's true that the young are poor savers, but I don't think this is a problem. One of the themes of my essay on the information problem in Social Security (warning: bad jokes in there) is that it's not necessarily true that people should save for retirement all their working lives. Having those funds available to pay off debt, for example, may be the best course of action. Any system of forced retirement savings prohibits this. I'm no fan of forced savings. It increases the financial stress and indebtedness of the young. One of my prepared questions (below) was directly about this issue.

The fifth question asked whether the cut in guaranteed benefits for people choosing personal accounts would be prorated by the person's age. Secretary Snow didn't answer this question directly, instead referring people to the website. I don't think the matter was too technical to discuss, so this was disappointing. My impression has always been that the answer is "yes," so I don't know why Snow hesitated.

The sixth and final question from FLIR employees was asked by someone who self-identified as a registered Democrat. He asked whether personal accounts fix the insolvency, and also about the borrowing related to the transition costs. Snow said that the questioner was right about personal accounts by themselves not fixing the solvency problem, but said that they make a better outcome possible for workers. In my words, personal accounts don't help the government's finances but they do help the worker's finances, by giving them a higher return on their money. Snow also said that the transition costs would not affect interest rates because that borrowing would be offset by deposits into personal accounts, which are a form of savings. This is an issue I've discussed too, although as I say in that link the transition costs are not completely ignorable, due to the real interest on debt to the public as opposed to phony interest on intragovernmental debt.

After the employee questions, the press was allowed to ask a few. These were much more difficult to hear, because the reporters and television camera moved close to the Secretary and were quieter.

I went to FLIR armed with three prepared questions, unsure if I'd be able to ask any. But I was. I asked the third (fourth?) press question:

Social Security reform has already failed once, in 1983. With this record, many young people do not trust any politicians to ever fix the system, and would like to simply opt out and be responsible for their own retirements. President Bush has stressed the voluntary nature of personal accounts — why not make the entire retirement portion of Social Security voluntary, as a third option?

This question did not please the Secretary. :) I wasn't able to write down his exact response, but in essence he said that I was suggesting privatization and that he wasn't talking about privatization. It's a shame the Administration isn't committed to voluntarism, because it would be a politically powerful position.

Allowing individuals to opt out of Social Security is the reform I favor.

Secretary Snow then announced that he was leaving. There were no further media questions. Here were my other two, that I didn't get to ask, that also would have made him uncomfortable:

Social Security is structured so that people save for their retirement all their lives, including when they're young and are likely to have debts at higher interest rates than their Social Security contributions earn. Would you comment on the effects of Social Security causing higher personal indebtedness among the young? Is this a hidden subsidy for the banking industry?

Some medical researchers believe that the next few decades will bring a dramatic increase in lifespans, and that people will be active and productive well past the age of 100. If that happens, how will the Social Security retirement age need to be changed, and will it be politically possible to do it before we have another Social Security crisis?

For more on the increasing lifespan angle, see this article I wrote a year ago.

I very much enjoyed my first experience being treated as a member of the media. My thanks again to the people at Treasury and FLIR who allowed me to attend, and I hope this encourages other bloggers to become more involved in media events as well.

Tiny Island